Flush With Cash, a Chain's New CEO Plots Smoothie Domination

One of Smoothie King's South Korean units. Korean franchisee Wan Kim, now the chain's CEO, has major expansion plans. (Photo: Courtesy of Smoothie King)

In many towns, there seems to be a smoothie shop on every corner. Major fast-food chains including McDonald's sell the fruit-filled drinks now. But the new CEO of number-two chain Smoothie King, Wan Kim, still sees a lot of opportunity -- and he's got the cash to take on archrival Jamba Juice, which is about 100 units ahead with 788 stores.

Kim has been a Smoothie King franchisee in South Korea for a decade, helping build the New Orleans-based company's presence in that country to 130 stores.

In July, he bought the nearly 40-year-old company from founders Steve and Cindy Kuhnau and secured $58 million in capital for growth from two institutional investors, Standard Charter Private Equity and National Pension Fund.

How does Smoothie King plan to grow in a market that seems crowded already? In a recent interview from headquarters, Kim shared his battle plan for smoothie domination:

Add food in the U.S. Kim pioneered a salad-and-wraps menu for the Korean stores that he plans to test and bring to the U.S. units. Right now, American stores sell little food -- just the odd energy bar. Adding more of a lunch menu offering "healthy portable meals on the go" could help grow existing-store sales. At the Korean stores, more than one-fifth of revenue comes from food.

Open company stores. Plans are to open 200 company-owned stores (currently there is only one company unit) over the next five years. These stores would become the testing ground for new initiatives, including the food. The company may also explore new store formats -- the Korean stores are larger and have more seating. "These will be flagship stores that show we're an 'A' brand," says Kim, "not a 'B' or 'C' one."

Explode domestic franchising. Kim hopes to open 800 franchised units over the next five years.

Emphasize health. Rather than just another smoothie store, Smoothie King's focus is on the health benefits and low calories in its drinks (many are around 300 calories). Kim says this approach builds more customer loyalty than positioning smoothies as a treat. Current tagline on the website: "Be good to yourself."

Stay where it's warm. Having watched the misadventures of other smoothie chains that expanded to cold-weather regions only to end up pulling back, Kim expects to focus most expansion in the southern U.S. First targets for expansion include Dallas and Miami.

Grow overseas. The company is also looking to increase its presence in Asia. Its first Singapore store -- a showy flagship in a Times Square-like location -- opens in December, and expect to see more units in the region next year.

Revamp marketing. In the past, Kim says Smoothie King suffered from "too many messages" in its advertising. The company has retained WD Partners to work on strategy and branding efforts. Expect an upcoming campaign to focus on nostalgia for the brand. "Some people have been coming here all their lives," Kim notes.

Dominate in social media. Smoothie King customers are engaged with the brand on Facebook, where a recent sweepstakes contest the chain ran garnered 4,725 responses and a big chunk of new Facebook fans. The company has a ways to go here -- Jamba Juice has 1.5 million fans compared with Smoothie's quarter-million.

Annual sales at existing stores have been rising, from an average of $285,000 three years ago to roughly $362,000 now, Kim notes. Between that positive trend and the cash infusion, the fundamentals are there on which to whip up a new round of smoothie growth.

The only question is whether franchisees will buy into the story and get on board. Even with multi-unit owners, it takes a lot of new unit owners to open 800 franchised stores.